LESS OF A TAX BURDEN: Singer-actress Bette Midler will save at least 40 percent on her property taxes on her
Laguna Beach oceanfront home if she’s granted relief under the Mills Act.

GIVING A HAND TO SAVE HISTORY CITIES:

A little-known law gives owners of historical homes tax relief for preservation.

Singer-actress Bette Midler will save at least 40 percent on her property taxes on her Laguna Beach oceanfront home if she’s
granted relief under the Mills Act.

The Diva found it divine, but the state’s happy she found it at all.

Using a little-known, 25-year-old piece of California legislation called the Mills Act, Bette Midler could reduce the property tax
on her 1926 French Provincial-style Laguna Beach home by at least 40 percent.

Her actual savings won’t be calculated until July, because Midler’s application just reached the county Assessor’s Office this
month.

Midler declined to be interviewed, but Gene Itogawa, historian for the state Preservation Office, couldn’t say enough about the
Mills Act. He hopes the star’s move will boost the popularity of this virtually unknown piece of legislation and inspire other
owners of historical property in Orange County to use it.

Itogawa calls the legislation “the single most important economic incentive program available” to owners of California historical
buildings.

Authored by former San Diego state Sen. James Mills in 1972, the Mills Act lightens the property-tax burden on historical
structures from 40 percent to 60 percent, to encourage owners to spend more money rehabilitating their homes. The property-
tax savings are based in part on the owner’s income and how much is spent to maintain the property.

Owners who enter into the 10-year agreement with their local governments must actively maintain the historical integrity of
their properties. That means homeowners can’t add three stories and five garages to a 1920s cottage, but they can’t let an old
building look like a war relic, either.

If they don’t hold up their end of the bargain, they could suffer a breach-of-contract penalty equal to 12.5 percent of the home’s
market value, said Ann Larson, a Laguna Beach senior planner.

The penalty sounds severe, but the positive outweighs the potential negative, said Ann Christoph, who runs her landscape
architecture firm from the tiny top floor of a 1939 Aubrey St. Clair building in Laguna Beach.

“We decided that it would give us more latitude,” said Christoph, who explained that historical buildings in Laguna Beach don’t
need to provide as much parking as modern buildings, and they can have such things as wood shake roofs.

“I wish we could have done it sooner,” Christoph said.

The building became part of a Mills Act agreement a year ago — too late to make up for the $60,000 already spent on
electrical upgrades, custom-made copper gutters and wood refinishing. Now all that is left to do is landscaping and general
maintenance.

“All the money was really spent 10 years ago,” said Christoph, who was slow to jump on the Mills Act mostly because not
many other people had. “You have reservations about why there aren’t more people using it.”

Laguna Beach, which adopted an ordinance supportive of the legislation in 1992, was one of the first Orange County cities to
enter into Mills Act agreements with homeowners.

The agreements are made between property owners and their cities, and each participating city has its own guidelines for
requirements and eligibility. Historical-property owners in cities that don’t have Mills Act agreements can’t participate in the
program.

Anaheim, Brea, Irvine and San Juan Capistrano have Mills Act agreements, and San Clemente signed its first 10 contracts in
December, bringing the total number of covered buildings in the county to 29. Nine property owners may soon sign agreements
in Tustin, and Orange is considering creating Mills Act ordinances.

“The first 20 years of this thing, I don’t think there was a lot of activity, but it seems to be something that’s up and coming these
days,” said Rich Swanson, a spokesman for the county Assessor’s Office.

A combination of Proposition 13 and some invasive requirements in the original act initially scared off property owners. But
over the years, the act has been amended at least four times, and it’s making a comeback.

In its original form, the Mills Act called for 20-year contracts that required property owners to open their doors to the public for
a specified number of days per year. If owners grew tired of having tourists in their living rooms and wanted to pull out of the
deal, they’d face a stinging penalty equal to 50 percent of the home’s market value.

Some homeowners also were uncomfortable with the idea of entering into private contracts with local governments.

“People were a little leery of government getting into their business,” said Joe Oliver, a San Clemente planning commissioner.
“It looked like Big Brother was looking over their shoulders.”

But since the legislation has been amended to limit the contract, eliminate the open-house requirement and reduce the penalty,
more homeowners have warmed to the idea, said San Clemente Associate Planner Teri Delcamp.

San Clemente limits the number of applications it will process in a year to 15, and by December at least that many homeowners
had expressed an interest in applying this year.

“I think it is very important because it seems that most of any other kinds of funding or resources for historic preservation are
no longer there,” Delcamp said. “They’ve dried up.”

What hasn’t dried up, the county Assessor’s Office said, is revenue from property taxes, approximately 64 percent of which
goes to county schools. In the legislation’s 25-year history, so few property owners have taken advantage of it, the reduction
in property taxes is immaterial, Swanson said.

The impact the act is expected to have on preservation, on the other hand, is great.

“The benefit is, we get to help preserve the historic structures in our city,” Delcamp said. “Some property owners have been
doing this regardless of incentives. This provides them with a sort of a thank you.”